ecgc export credit guarantee corp of india summer training

8/2/2019 ECGC Export Credit Guarantee Corp of India Summer Training

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ANALYSIS OF PREMIUM INCOME

UNDER

ECIBWTPCG FOR BANKS

EXPORT CREDIT GUARANTEE

CORPORATION OF INDIA

Presented By :

Pranav Shrimali (28)


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Set up on 31st July, 1957

1957 - Export Risks Insurance Corporation (ERIC)

1964 - Export Credit & Guarantee Corporation Limited

(ECGC)

1983 - Export Credit Guarantee Corporation of India Limited

(ECGC)

Wholly owned by the Government of India

Brief History


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Provides credit risk covers to Exporters against non payment

risks of the overseas buyers/buyers country in respect of the

exports made.

Provides credit Insurance covers to banks against lending risksof exporters

Rated iAAA by ICRA.

An ISO organization excelling in credit insurance services

5th largest credit insurer of the world 5 regional offices and 51 branches

ECGCAn Export Promotion Institution


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ECGC

BanksExporters

GuaranteePolicy


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Offers insurance protection to exporters against payment risks

Provides guidance in export-related activities

Makes available information on different countries with its

own credit ratings

Makes it easy to obtain export finance from banks/financial

institutions

Assists exporters in recovering bad debts

Provides information on credit-worthiness of overseas buyers

How does ECGC help exporters?


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Standard Policy Shipment Comprehensive Risk Policy

Small Exporters policy

Specific Shipment Policy (short term)

Export Turnover policy

Specific buyer wise policy

Consignment export policy

Global entity policy

Single buyer exposure policy

Multi buyer exposure policy

Software project exports policy IT enabled (single customer) policy

IT enabled (multi customer) policy

SME Policy

Customer specific policy (Tailor made)

Products offered to Exporters : Policies


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Guarantees to Banks(ECIB)


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Any loan given to an exporter for the manufacture, processing,purchasing or packing of goods meant for export against a firmorder or Letter of Credit qualifies for Packing CreditGuarantee.

The Packing Credit Guarantee of ECGC helps the exporter toobtain better and adequate facilities from their bankers.

The Guarantees assure the banks that, in the event of an

exporter failing to discharge his liabilities to the bank, ECGC

would make good a major portion of the bank's loss. The bank is required to be co-insurer to the extent of the

remaining loss.

Packing Credit Guarantee


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ECIB-Packing CreditIndividual & WT

ECIB-Bank-wise Packing Credit

ECIB-Sector Packing Credit

ECIB- Post-shipmentIndividual & WT ECIB-Export Performance

ECIB-Production Finance

ECIB-Export Finance

Choice of ECIB covers


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Purpose :

To indemnify any defaults in the Pre-shipment advances givenby a Bank to all its customers (exporters) on all India basis.

ECIB- Wholeturnover Packing Credit

(ECIB-WTPC)


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Minimum number of accounts & premium applicable.

- Higher percentage of cover with lower premium rate andreduction in procedural formalities.

To seek approval for limit beyond specified/new accounts/assetclassification beyond Std.

Premium payable on average outstanding.

Cover percentage- 50/60/75/90.

Restricted Cover country cover.

Procedural aspects of ECIB-WTPC


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ANALYSIS


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NUMBER OF BANKS NO. OF BRANCHESWTPCG31 167

Premium Earned under Whole Turnover Packing

Credit Guarantee at Ahmedabad Branch

Year 2008-09 2009-10 2010-11

Amount Rs.

11,66,30,409/-

Rs.

10,78,39,383/-

Rs.

10,46,05,746/-

% Change - (7.54) (3.00)


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0

20000000

40000000

60000000

80000000

100000000

120000000

140000000

2008-09 2009-10 2010-11

YEAR

Premiu

m(

Rs.)


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Sr

No.

Bank 2008 -2009

2009 -

20102010

2011

% Change

from

FY 08-09

To

FY 09-10

% Change

from

FY 09-10

To

FY 10-111 SBI Ahmedabad Lho - For

Sipcg4,52,73,431 4,26,03,835 3,00,38,222 (5.90) (29.49)

2 Bank Of Baroda 1,99,25,689 2,13,20,239 2,19,40,390 7.00 2.913 Punjab National Bank 99,58,366 80,49,960 95,78,564 (19.16) 18.994 Bank Of India 1,00,17,942 52,36,994 56,91,023 (47.72) 8.675 Union Bank Of India 35,98,088 32,34,935 46,47,102 (10.09) 43.656 Oriental Bank Of Commerce 23,70,554 31,35,139 43,73,196 32.25 39.497 Central Bank Of India 10,03,421 6,49,720 40,75,028 (35.25) 527.208 Uco Bank 41,98,207 44,75,440 40,69,352 6.60 (9.07)9 Axis Bank (Formerly Uti

Bank)20,02,499 28,45,052 38,14,025 42.08 34.06

10 Canara Bank 13,68,695 21,53,032 33,90,558 57.31 57.48

The Top 10 banks paying premium


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0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

50,000,000

SB

IAhmedabad

Lho-

ForSipcg

Ba

nkOfBaroda

Pu

njabNational

Bank

BankOfIndia

U

nionBankOf

India

O

rientalBank

O

fCommerce

CentralBank

OfIndia

UcoBank

AxisBank

(FormerlyUti

Bank))

CanaraBank

2008 - 200

2009 - 201

2010 - 2011


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Premium income contribution of Top Ten Banks for the

year 20102011.


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The overall premium income under the WTPCG category has decreased by7.54% and 3% in the years 2009-2010 and 2010-2011 respectively

suggesting a decreasing negative trend in premium earned under category.

Premium adjusted has shown negative performance. The main cause for

this is low exports, which ultimately has less takeover of PC and PS facility

from bank is the global recession which has put an adverse effect on the

advances granted by the bank to the exporters.

The non-payments reported from overseas buyers have also forced banks to

apply cautious approach while sanctioning finance. This has overall effect

on the performance of branchs premium income earning.

FINDINGS


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Defaults of major buyers of credit facility also have effect on advances like

MICRO FORGE LTD., GPT STEELS LTD., VEOL, SHREE

RANGNATHA EXPORTS, ETC.

The fluctuations in Steel and Cotton markets have impact on advancestaken by export community from banks.

Many banks have restricted packing credit and advances.

contd.


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There is a continuous decline in premium income earned from State Bankof India under SIPCG as there is a fall by 5.90% from financial year 2008-

2009 to 2009-2010. This negative trend continued in financial year 2010-

2011 by a further decline by nearly 30% which in turn have caused loss of

premium income of more than 1.5 crores from State Bank of India alone.

Bank of Baroda has shown continuous growth of premium income by

paying regular premiums but the pace of the growth is reduced by decline

in premium rates on renewal of guarantees.

Central Bank of India showed an enormous jump of premium payments by

527% in year 2010-2011. The main reason behind this increase in premium

payments is inclusion of ELECTROTHERM (I) LTD. as exporter in the

Central Bank of India.

contd.


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The units are having sound liquidity position and hence not utilizing fund fromthe Banks. Most of the large industries have gone for public issue andgenerated good funds out of it.

The reason for non-availment of limits by Adani group is that the funds raised

through GIP and right issue. Currently they are doing only coal trading. Otheroperations are divested in other group companies.

Most of the clients from this region are having offices in Mumbai and they areavailing the advances from Mumbai based branches.

Suzlon Groups limit approval has made it move out of the limit sanctioned forthe branch and has been shifted to the Mumbai based Project Export branch.This made the branch lose more than 150 lakhs of premium alone from asingle company.

Reasons mentioned by the banks are :


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The best way to get and keep customers is to constantly figure out how togive them more for less. The premium rate should be competitive enough

so that the exporters dont feel as an additional burden to them.

Continuous followup with bank branches who have stopped paying

premiums and sending declarations.

In order to get maximum out of the export industry, Small and Medium

Enterprises should be targeted for the branchs growth and success and to

maintain the position.

To make available the negative list of buyers to all the policyholders &

banks.

SUGGESTIONS


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It should simplify the claim settlement procedure.

Cover on poor countries can be provided with higher premium.

Time to time changes should be made in schemes according to the needs ofthe customers (customization of policies & guarantees).

Formalities for policy issue & guarantees should be as simple and less in

number as possible.

ECGC can conduct exporters & bankers meet and seminars which will also

increase its awareness.

contd.


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ecgc export credit guarantee corp of india summer training

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